TEL AVIV -- Israeli voters handed the Labor Party's Ehud Barak a landslide victory in Monday's prime ministerial election -- but it is far from certain that the former soldier can meet the soaring expectations here that he will usher in peace and a robust regional economy.

Mr. Barak, who campaigned as a national healer, crushed incumbent Benjamin Netanyahu last night in a two-way race, avoiding a runoff. With 71% of the vote counted, Mr. Barak led by 55.9% to 43.9% for Mr. Netanyahu. Parties aligned with Mr. Barak would...